The Blockchain Association and the Crypto Council for Innovation (CCI) have filed a lawsuit challenging Illinois’s new Digital Asset Tax Act. The groups argue the state exceeded its constitutional authority by targeting digital-asset activity with a tax that has no equivalent for traditional assets. The lawsuit claims the law violates the federal Dormant Commerce Clause and the Internet Tax Freedom Act. The plaintiffs seek a court order to declare the law unlawful and prevent its enforcement, warning that other states might follow Illinois’s lead and create a fragmented national regulatory system.
The Blockchain Association and the Crypto Council for Innovation have legally challenged Illinois’s new Digital Asset Tax Act, arguing the state “went beyond its constitutional authority” by creating a tax specifically targeting digital-asset activity. The press release stated the groups are asking “the court to declare the Digital Asset Tax Act unlawful and enter preliminary and permanent injunctive relief barring the State from enforcing it.”
The lawsuit claims the Illinois Act violates the Dormant Commerce Clause, a legal doctrine derived from the U.S. Constitution’s Commerce Clause. This doctrine prevents states from creating tax or regulatory systems that unfairly discriminate against interstate commerce. Ji Hun Kim, CEO of the Crypto Council for Innovation, said, “A tax on digital asset activity with no equivalent tax for traditional assets unlawfully picks winners and losers through the tax code.”
The crypto groups are concerned that if one state creates a special tax on digital-asset activity, other states might introduce their own rules and taxes. This could create a fragmented system where a company operating across the U.S. faces different tax structures in every state. The lawsuit also alleges the Illinois law violates the federal Internet Tax Freedom Act, which generally restricts discriminatory taxes on internet access and certain forms of electronic commerce.
Summer Mersinger, CEO of the Blockchain Association, stated, “We are bringing this challenge to protect those fundamental principles and ensure Illinois stays within the bounds of the law.” The crypto community is additionally challenging how the law was passed, arguing it “moved through the Illinois legislature within hours, without enough debate, public notice, or opportunity for affected businesses and residents to provide input.” The groups also argue the law raises due process concerns because its requirements may be unclear, as “States have an important role to play in fostering innovation, but that authority has constitutional limits.”
